The traveler in this poem is in a forest, or "wood". The first and last lines of the first stanza reveal the setting. In the first line, the traveler has encountered two roads in a "yellow wood". That the wood is described as "yellow" gives us to understand that it is autumn when the traveler comes upon the diverging roads. In the last line of the stanza, the traveler is considering the choice before him, looking down one road as far as he can until it disappears into the "undergrowth". This further establishes the setting as we are able to picture the brush and trees of the woods which make up this "undergrowth" and crowd the traveler's view of the road.

At the beginning of the poem, the narrator is standing at a fork in the road, where the path takes two different directions. He can't take both paths, so he stands in indecision, trying to decide.

Two roads diverged in a yellow wood,And sorry I could not travel bothAnd be one traveler, long I stoodAnd looked down one as far as I couldTo where it bent in the undergrowth;(Frost, "The Road Not Taken," bartleby.com)

This, for the narrator, is the moment of decision. He can only decide on his path based on his assumptions about the future; since he can't actually predict the future, he uses all the information available at that moment (looking down until the path bends and is out of sight) to inform his decision. At the fork of the path (faced with two options in life to choose from) the narrator is worried that he will make the wrong decision, but knows that he can only take one path (one option). Later, he might regret his decision, but at this moment, with only the immediate information available, he chooses the path "less traveled by" (the less-common option) and walks forward into his future.